The Nikkei India (Japanese firm)
Enrich Your Learning:
Purchasing Managers Indexes (PMI):
- The Nikkei India Manufacturing PMI is based on data compiled from monthly survey responses by purchasing managers from the companies.
- Purchasing Managers’ Index (PMI) is an indicator of business activity — both in the manufacturing and services sectors and measures activity at the purchasing.
- For India, the PMI Data is published by Japanese firm Nikkei but compiled and constructed by Markit Economics.
- The PMI is a private sector survey.
- It is a survey-based measures that asks the respondents about changes in their perception of some key business variables in last month.
- The report shows the percentage reporting each response, the difference between the number of higher or better responses and lower or worse responses and something called a diffusion index.
- Diffusion indexes have the properties of leading indicators and are convenient summary measures showing the prevailing direction of change.
- It is calculated separately for the manufacturing and services sectors.
- It is usually released at the start of the month, much before most of the official data on industrial output, manufacturing and GDP growth becomes available.
- Therefore, it is considered a good leading indicator of economic activity. Economists consider the manufacturing growth measured by the PMI as a good indicator of industrial output, for which official statistics are released later.
- Central banks of many countries also use the index to help make decisions on interest rates.
- It also gives an indication of corporate earnings and is closely watched by investors as well as the bond markets.
- However, the PMI suffers from the lacuna of not measuring informal sector activity. Once the overall number for the month is computed, the score is arrived at 50 denotes expansion while one below 50 signifies contraction.
Indices of PMI:
PMI is composite index based on five individual indices with their own weightages are as under respectively.
- New orders.
- Suppliers’ delivery times.
- Stock of items purchased.